MarketView for February 20

Summary

Stocks fell the most in three months and a key gauge of market volatility spiked on Wednesday after minutes from the Federal Reserve's most recent meeting suggested the central bank may slow or stop buying bonds sooner than expected.

The minutes from the Fed's January meeting showed many officials voiced concern last month over potential costs of more asset purchases, suggesting that the program, known as QE, may slow before the pickup in hiring it was intended to deliver.

Wednesday's slide marked a rare return of nervousness to markets after their solid march higher this year. The CBOE Volatility index, a measure of investor fear, rose 19.3 percent, largest daily increase for the VIX since November 2011.

Prominent stocks in a range of sectors booked sharp losses after disappointing earnings and outlooks, including homebuilder Toll Brothers, fertilizer maker CF Industries, and oil and gas producer Devon Energy Corp (DVN.N).

A slide in the commodity sector also weighed on stocks. Spot gold dropped to the lowest level since July, benchmark industrial metal copper fell to a one-month low, and domestic crude oil futures were down more than $2 a barrel. For the benchmark S&P 500, the day's decline was the largest since November 14.

The Fed has used quantitative easing, or QE, since 2008 as it aims to stimulate the economy. The policy, which involves expanding the Fed's balance sheet to buy bonds, has been credited with pushing money into the stock market and it withdrawal is a wild card for markets.

Nonetheless, the S&P 500 is up about 6 percent so far this year.

Energy companies' shares were among the weakest, hurt by disappointing results in the sector and a 2 percent drop in crude oil prices. Newfield Exploration was down 9.3 percent to $24.75 while Devon Energy fell 6.6 percent to $56.57. Both companies posted fourth-quarter losses, with Devon hurt as it wrote down the value of its assets by $896 million because of weak natural gas prices.

Earlier in the day, unconfirmed rumors that a troubled hedge fund was selling assets added some downward pressure to the market. The rumors appeared to be unfounded.

Housing shares also declined, pressured by weaker-than-expected results at Toll Brothers and a decline in housing starts during January.

Toll Brothers' shares fell 9.1 percent to $33.56, but are up about 4 percent so far this year, building on an increase of nearly 60 percent in 2012.

The Dow's losses were limited by Boeing, up 0.2 percent at $74.78. Concerns over the Dreamliner have weighed on Boeing recently, contributing to a 2 percent drop in the stock's price in January.

Shares of OfficeMax fell 7 percent to $12.09 while Office Depot was down 16.7 percent to $4.18 as the companies announced a $1.2 billion merger agreement. The shares had surged in Tuesday's session after a source said a deal would be announced. Staples fell 7.2 percent to $13.60 and ranked as one of the S&P 500's largest decliners.